MBW Reacts is a collection of analytical articles from Music Business Worldwide written in response to main latest leisure occasions or information tales. 

As anticipated, Spotify in the present day (July 24) – after 12 lengthy years – finally announced a 10% rise in its flagship particular person Premium subscription worth in the US, up from USD $9.99 per 30 days to $10.99 per 30 days.

Not solely that: Spotify can also be elevating the value of its different subscription plans within the US. This contains its Household Plan, which strikes up from $15.99 to $16.99 per 30 days; it’s the second time SPOT has upped this explicit worth level within the States (the first was in 2021), and brings Spotify’s Household Plan pricing in step with that of different providers akin to Apple Music and YouTube Music.

The (a lot) bigger-picture information in the present day?

Spotify isn’t simply rising its costs within the US – it’s additionally upping its subscription value (throughout numerous plans, together with particular person Premium) in a whopping 52 different markets, together with the UK, Canada, Brazil, Spain, France, Australia, Indonesia, Israel, Sweden, and Mexico.

But how a lot will this new spherical of worth will increase from Spotify be value to the corporate – and to the music rightsholders to whom it pays out round 70% of its revenue?

MAPPING SPOTIFY’S REACH IN THE US

Based on the National Music Publishers’ Association (NMPA), Spotify had 44.4 million paying US subscribers in February 2023.

Based on Spotify’s personal Q1 2023 report, reflecting the top of March, it had 210 million Premium subs globally, of which roughly 28% resided in North America.

Meaning roughly 58.8 million subs in North America – that’s the US plus Canada.

Clearly if all of the 44.4 million US Spotify subs highlighted by the NMPA noticed a $1 enhance per 30 days from in the present day onwards, it could end in a income bump of greater than half a billion {dollars} yearly ($533 million – that’s 44.4m X $12) for Spotify.

Sadly for these of us who like numerical simplicity… issues most likely aren’t fairly that easy.

A major variety of these 44.4 million subscribers can be on plans managed both via lower-cost bundle offers via telcos and/or promotional plans from Spotify (three months for $1, that form of factor).

Additionally including complication to the image: Spotify might need simply upped the value of its whole first-party (i.e. non-telco-bundled) suite of Premium worth tiers within the States – nevertheless it didn’t elevate each tier by the identical quantity.

As talked about, Premium particular person worth within the US simply went up +$1 per 30 days, however Premium Duo (a reduced provide for {couples}) truly went up by +$2 per 30 days – from $12.99 to $14.99 per 30 days.

Premium Household additionally went up by +$1 per 30 days (from $15.99 to $16.99), as did Premium Pupil (from $4.99 per 30 days to $5.99 per 30 days).

It’s a fancy image.

However we are able to nonetheless experiment with another strong numbers in a free bid to grasp what this newest US worth rise may be value… at a minimal.

Working the numbers within the US

Spotify says its official world month-to-month ARPU (Common Income per Paying Person) on the finish of Q1 2023 was EUR €4.32. 

That’s equal to USD $4.64 based on common quarterly change charges as per the European Central Financial institution.

The US is a comparatively high-revenue-per-head market, so Spotify’s true subscriber ARPU within the States is sure to be considerably increased than this (with so-called ’rising’ markets knocking down the worldwide common).

Regardless, for the mathematical train we’re endeavor right here, let’s use the official world ARPU quantity for Spotify, even whereas figuring out the actual determine within the US must be greater.

If the 44.4 million US Spotify subs in February (as per the NMPA) have been paying USD $4.64 per 30 days on common (Spotify’s world subs ARPU in Q1), a 10% worth rise within the combination would end in a $5.57 annual uplift ($0.464 X 12) within the quantity paid by every Spotify sub.

If this 10% ARPU uplift (+$5.57 yearly) carried throughout all 44.4 million Spotify subs counted by the NMPA, it could end in a $247 million yearly bump in SPOT’s revenues.

So between this (very conservative) $247 million quantity and the (most likely too simplistic) $533 million quantity calculated above (44.4 million subs X $12), you’ll possible discover the precise bump in yearly revenues that Spotify is about to get pleasure from from its newest worth rise… and that’s simply in the US.

The larger image exterior the US

The above doesn’t even bear in mind what’s going to occur within the 52 markets through which Spotify has simply raised its costs exterior the US – an excellent greater alternative for income development.

Let’s simply begin with Canada.

Keep in mind that Spotify’s personal numbers recommended that it had 58.8 million subscribers within the US and Canada (‘North America’) on the shut of Q1?

If the conservative (world ARPU-based) common USD $5.57 annual worth rise we’ve been enjoying with right here utilized to all these subs in North America?

That’s roughly USD $328 million in new cash every year. And, once more, that’s conservative.

Now let’s have a look at Europe – the place Spotify in the present day introduced worth rises in key territories like France, the UK, Spain, Sweden, and Norway (however apparently, not Germany).

Based on Spotify’s filings, 39% of its 210 million world subscribers on the shut of Q1 have been situated in Europe – i.e. some 81.9 million individuals.

If our conservative (world ARPU-based) projected income rise of USD $5.57 per 12 months, per sub utilized there after in the present day’s modifications?

That’s one other $456 million per 12 months – not together with cash gained in territories such because the US, Canada, Asia, Latin America… or different world areas.

The larger image In the US

This story can also be greater than Spotify itself.

As an instance, let’s momentarily focus again on the US… however have a look at what else has been occurring up to now 12 months on the market’s different largest music streaming service – Apple Music.

Based on the NMPA, Apple Music counted 32.6 million paying subscribers within the US in February 2023.

Apple Music bumped up its US subs price in October last year, throughout each its Household plan (from $14.99 per 30 days to $16.99 per 30 days) and its particular person plan (from $9.99 per 30 days to $10.99 per 30 days).

Keep in mind that, by assuming a 10% uplift to Spotify’s world ARPU determine in our earlier calculations, we provided the (very conservative) speculation that SPOT might see a +$5.57 annual income rise for every of its US subscribers.

If the identical was utilized to Apple Music’s subs as of February this 12 months (32.6m, based on the NMPA) it could end in a USD $181.5 million annual uplift in subs revenues.

And if Apple managed to boost the quantity paid by all of these 32.6 million US subs by a fundamental $1 per 30 days? You’d be an extra $391 million.

Like with Spotify, the actual determine most likely lies between these two factors.

The opposite excellent news

One additional factor we must always point out: This play-with-the-numbers evaluation has relied on the NMPA’s February 2023 data and Spotify’s personal information (as of the shut of Q1 2023) as its foundation.

However SPOT’s subscriber numbers carry on ticking up and up – at the same time as you learn this.

Certainly, David Israelite, CEO and President of the NMPA (pictured), confirmed in June – based mostly on the NMPA’s personal numbers: “When Amazon and Apple raised their subscription costs [in the US], not solely did they not lose subscribers – they skilled subscriber development.”

At the moment’s rise in Spotify’s pricing, then, guarantees to supply a serious payday for the broader music trade.

In flip, the music trade can be hoping that mentioned worth enhance goes hand-in-hand with a continued regular rise within the quantity of individuals – each in and outdoors the US – which are subscribing to Spotify, too.Music Enterprise Worldwide